Although most insurance companies are required to act in good faith to their policy holders, many insurance companies fail to do so and treat the customer making the injury claim, disability claim, or other insurance claim as an adversary. These actions have forced the Texas legislature to adopt laws within the Texas Insurance Code to regulate these practices and to provide the consumer with a remedy for an insurance company's failure to act in good faith. The insurance attorneys at Bemis, Roach & Reed are proud of successfully representing victims of insurance bad faith in the state of Texas.
The Texas Insurance Code establishes practices in the state which constitute unfair methods of competition or unfair or deceptive acts. The Insurance Code in Section 541 (formerly Article 21.21) defines "unfair settlement practices," also referred to as insurance bad faith, as engaging in any of the following practices with respect to a claim by an insured or beneficiary:
- Misrepresenting to a claimant a material fact or policy provision relating to coverage at issue;
- Failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer's liability has become reasonably clear;
- Failing to attempt, in good faith, to effectuate a prompt, fair, and equitable settlement under one portion of a policy of a claim with respect to which the insurer's liability has become reasonably clear in order to influence the claimant to settle an additional claim under another portion of the coverage, provided that this prohibition does not apply if payment under one portion of the coverage constitutes evidence of liability under another portion of the policy;
- Failing to provide promptly to a policyholder a reasonable explanation of the basis in the policy, in relation to the facts or applicable law, for the insurer's denial of a claim or for the offer of a compromise settlement of a claim;
- Failing within reasonable time to:
- Affirm or deny coverage of a claim to a policyholder; or
- Submit a reservation of rights to a policyholder;
- Refusing, failing or unreasonably delaying an offer of settlement under applicable first-party coverage on the basis that other coverage may be available or that third parties are responsible for the damages suffered, except as may be specifically provided in the policy;
- Undertaking to enforce a full and final release of a claim from a policy holder when only a partial payment has been made, provided that this prohibition does not apply to a compromise settlement of a doubtful or disputed claim;
- Refusing to pay a claim without conducting a reasonable investigation with respect to the claim;
- With respect to a Texas personal auto policy, delaying or refusing settlement of a claim solely because there is other insurance of a different type available to satisfy all or any part of the loss forming the basis of that claim; or
- Requiring a claimant, as a condition of settling a claim, to produce the claimant's federal income tax returns for examination or investigation by the person unless:
- The claimant is ordered to produce those tax returns by a court;
- The claim involves a fire loss; or
- The claim involves lost profits or income.
Section 542.003 of the Texas Insurance Code, entitled "Unfair Claim Settlement Practices" provides that an insurer engaging in business in Texas may not engage in the following unfair claim settlement practices:
- Knowingly misrepresenting to a claimant pertinent facts or policy provisions relating to coverage at issue;
- Failing to acknowledge with reasonable promptness pertinent communications relating to a claim arising under the insurer's policy;
- Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under the insurer's policies;
- Not attempting in good faith to effect a prompt, fair, and equitable settlement of a claim submitted in which liability has become reasonably clear;
- Compelling a policyholder to institute a suit to recover an amount due under a policy by offering substantially less than the amount ultimately recovered in a suit brought by the policyholder;
- Failing to maintain the information required by Section 542.005; or
- Committing another act the commissioner determines by rule constitutes an unfair claim settlement practice.
The Texas Insurance code was enacted to assist in the prompt payment of insurance claims. Section 542.055 (formerly Article 21.55) of the Insurance Code requires most insurance companies to within 15 days after its receipt of notice of a claim to:
- Acknowledge receipt of the claim;
- Commence any investigation of the claim; and
- Request from the claimant all terms, statements, and forms that the insurer reasonably believes, at that time, will be required of the claimant. Additional requests may be made if, during the investigation of the claim, such additional requests are necessary.
Insurance Code Sections 542.003 and 542.055 allow claimants who prove a violation of certain of the provisions of these acts to recover additional damages and attorney's fees. Certain insurance claims, often health insurance claims and disability benefits claims, are governed by a federal law known as ERISA. (Employee Retirement Income Security Act). If your claim is governed by ERISA, certain procedural requirements must be met and State law typically does not apply. Although typically more difficult to prosecute than ordinary insurance cases, we have successfully represented numerous clients in these cases and obtained substantial recoveries. For more information concerning ERISA as it pertains to disability benefits plans, follow this link.
The insurance attorneys at Bemis, Roach & Reed use their extensive knowledge of the Insurance Code to ensure their client's rights are protected when dealing with first party insurers and insurance bad faith. Austin personal injury law firm Bemis, Roach & Reed provides legal services to individuals throughout the State of Texas. Call toll free (866) 433-4979 for a free personal consultation.